The v-ets oncogene derived from the avian acute leukemia virus, E26, was expressed in retroviral and metallothionein-based mammalian expression vectors. It induced a low level of foci of proliferating cells in NIH3T3 fibroblasts grown in low (0.1%) serum and defined media. The mitogenic activity of v-ets was similar to that observed for avian c-ets-1 in similar constructs. The entire E26-derived gag-myb-ets fusion gene induced hematopoietic disease, characterized by spleen enlargement when introduced into newborn mice via infection as a murine retrovirus derived from a retroviral vector construct. Cells from enlarged spleens grew efficiently into cell lines in the presence of the hormone erythropoietin (Epo) and the majority of the lines remained Epo-dependent. Several properties of these cells, including the absence of B-, T- and myeloid-specific surface markers, suggested that these cells may represent early erythroid precursors or stem cells.